The Bank of England's Monetary Policy Committee voted overwhelmingly in favour of raising interest rates earlier this month, minutes of the meeting reveal.
Only one of the nine MPC external members, Marian Bell, opposed the decision to raise the cost of borrowing. The committee's decision saw rates rise by 0.25% to 3.75% – the bank's first upward move for almost four years.
The majority of committee members felt that a modest rise in the key interest rate was appropriate because of stronger evidence of global economic recovery and better balanced growth within the UK. The minutes of the November 5-6 meeting confirmed the Bank's fears over the public's tendency to spend and borrow on the back of historically low rates.
The minutes says: “If rates were not raised, household borrowing would be more likely to continue to grow at a rate which would eventually prove unsustainable and there would be greater risk of a sharp downward adjustment to house prices if they became more overvalued, complicating the operation of monetary policy.”
The minutes also noted that consumer demand and the housing market were not slowing as much as the committee had expected.
Most MPC members noted that, even after the increase from 3.5%, monetary policy would still be 'accommodative'.
In arguing against a rate rise, Bell says that the bank's inflation projections for the next two years were too high. In its quarterly inflation report last week, the bank says that underlying inflation – which excludes mortgage interest payments – was still most likely to be above its 2.5% target in two years, and rising even after this month's increase in interest rates.